Operational Efficiency and Profitability of Kenyan Commercial Banks

Abstract

The commercial banks deals with most liquid asset (cash) of people and helps them for the stability and growth of economy. Kenya is one of the important East African Countries. It has a population of 40 million people. The policy frame work of Kenya combines socialistic and capitalistic features with a heavy bias towards private sector investment. However, the last couple of decades in Kenya have witnessed continuous change in regulation, technology and competition in all sectors including financial services industry. The rising cost ratio and declining profitability are mainly due to increased competitive pressure from global players. To assess the stability of the banking system, it is therefore crucial to benchmark the performance efficiency of banks operating in Kenya. An efficient banking system contributes in an extensive way to higher economic growth in Kenya. This paper investigates the performance analysis of Kenyan Commercial banks. It is found that private banks performed relatively well compared to public banks sector and foreign sector banks in Kenya.